Fitch Affirms White Mountains' Ratings; Revises Folksamerica's Rating.CHICAGO -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has affirmed the 'BBB+' issuer default ratings (IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ) of White Mountains Insurance Group White Mountains Insurance Group is a holding company with business interests in property and casualty insurance, and reinsurance. The group owns the direct marketing insurer Esurance. External links
As one of the oldest property and casualty insurers in the United States, OneBeacon traces its roots to 1831 and (OneBeacon; see member list below). In addition, Fitch has revised downward the IFS rating of Folksamerica Reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. Company (Folksamerica) to 'A-' from 'A'. Also, Fitch has assigned an 'A-' IFS rating to Sirius International Insurance Corporation (Sirius International). The Rating Outlook is Stable. The downward revision of Folksamerica's rating reflects the implementation of Fitch's notching methodology that was introduced globally earlier this year, but was delayed for Folksamerica pending an updated analysis to determine the applicable ratings under the new group IDR methodology. Fitch considers White Mountains to have two separate core businesses, primary property/casualty insurance, through OneBeacon and Esurance, and reinsurance, through White Mountains Re. As a result, Fitch applies a group IDR approach separately to each core business. In the case of Folksamerica, a core insurer within the White Mountains Re group, the downward revision reflects that in the U.S., reinsurance obligations in a liquidation The collection of assets belonging to a debtor to be applied to the discharge of his or her outstanding debts. A type of proceeding pursuant to federal Bankruptcy rank at the same level as other unsecured creditors Unsecured Creditor An individual or institution that lends money without obtaining specified assets as collateral. This poses a higher risk to the creditor because they have nothing to fall back on should the borrower default on the loan. A debenture holder is an unsecured creditor. , and are thus not afforded priority status similar to primary policyholders. While this does not increase the risk of default, it does result in a lower recovery rating assumption for Folksamerica, and thus a lower IFS rating. The assignment of the Sirius International rating reflects Fitch's view of the company as a core insurer within the White Mountains Re group. Sirius International, based in Sweden, was acquired by White Mountains from ABB n. 1. Among weavers, yarn for the warp. Hence, Noun 1. ABB - an urban hit squad and guerrilla group of the Communist Party in the Philippines; formed in the 1980s Ltd. in April 2004, at which time White Mountains Re was formed to manage White Mountains' global reinsurance operations. The ratings of White Mountains and its insurance subsidiaries reflect the company's reasonable financial leverage, disciplined underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. and operating strategy, strong management team and high quality investment portfolio. Weighted against these positives are significant reserves in discontinued/run-off lines, recent catastrophe related losses and the recent concerns surrounding its relationship with Olympus Reinsurance Company, Ltd. (Olympus), its 'sidecar' reinsurance vehicle. White Mountains' strategy has involved purchasing fundamentally sound companies or operating businesses/renewal rights at less than fair or intrinsic value Intrinsic Value 1. The value of a company or an asset based on an underlying perception of the value. 2. For call options, this is the difference between the underlying stock's price and the strike price. from sellers that are seeking to exit the insurance business. The company's focus is on the economics of the deal, regardless of the future accounting impact (i.e. adverse loss reserve development, negative operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. ). The company will also sell at a profit those businesses that do not fit within the core operations of the company, but still have value to other companies/buyers as entities or renewal rights. Fitch believes that management has overall been successful with its strategy, generating almost $900 million of total after-tax net gains (including deferred credits recognized) on its transactions since the beginning of 2001. White Mountains suffered significant losses related to the 2005 gulf coast storms through both its reinsurance operations and its investment in Montpelier Re Holdings, Ltd. In addition, the company entered into an indemnification agreement earlier this week under which White Mountains will reimburse re·im·burse tr.v. re·im·bursed, re·im·burs·ing, re·im·burs·es 1. To repay (money spent); refund. 2. To pay back or compensate (another party) for money spent or losses incurred. Olympus for up to $137 million of the $143 million in second quarter 2006 adverse loss reserve development on the 2005 gulf coast storms that was ceded to Olympus by Folksamerica. Fitch has concerns about the potential for additional adverse development on the 2005 storm losses, although the offshore energy and marine exposures are now set at full policy limits, as well as concerns about the ability of Olympus to serve as a viable reinsurance vehicle going forward. Nevertheless, White Mountains has continued to demonstrate its support of Folksamerica, including $250 million in capital contributions in 2005. White Mountains Re has also recently implemented a more conservative approach to underwriting and pricing catastrophe exposed reinsurance contracts, incorporating maximum foreseeable loss (MFL MFL Minimum Flows and Levels (ground water) MFL Modern Foreign Language MFL Magnetic Flux Leakage MFL Medium Flood (stage lighting) MFL Manitoba Federation of Labour ) analysis, reducing occurrence limits and increasing retentions, and exiting the gulf coast offshore energy and marine market. While Fitch recognizes that there is still some uncertainty regarding Olympus, Fitch expects any impact to be at a manageable level that is already reflected in the revised 'A-' IFS rating of Folksamerica. The following are affirmed by Fitch with a Stable Rating Outlook: White Mountains Insurance Group, Ltd. --Issuer default rating at 'BBB+'. Fund American Companies, Inc. --Issuer default rating at 'BBB+'; --US$700 million 5.9% due May 15, 2013 at 'BBB'. OneBeacon Insurance Group Members include: American Central Insurance Company American Employers' Insurance Company Atlantic Specialty Insurance Company AutoOne Insurance Company AutoOne Select Insurance Company Camden Fire Insurance Association (The) Employers' Fire Insurance Company (The) Esurance Insurance Company Esurance Property and Casualty Insurance Company Farmers and Merchants Insurance Company Homeland Central Insurance Company Homeland Insurance Company of New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of Massachusetts Homeland Insurance Company Midwestern Insurance Company Northern Assurance Company of America (The) OneBeacon America Insurance Company OneBeacon Insurance Company OneBeacon Lloyd's of Texas OneBeacon Midwest Insurance Company Pennsylvania General Insurance Company Traders & General Insurance Company York Insurance Company of Maine --Insurer financial strength at 'A'. The following rating is revised downward by Fitch and assigned a Stable Rating Outlook: Folksamerica Reinsurance Company --Insurer financial strength revised to 'A-' from 'A'. The following rating is assigned by Fitch with a Stable Rating Outlook: Sirius International Insurance Corporation --Insurer financial strength at 'A-'. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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